March 31, 2006 - Brett Steenbarger



March 31, 2006

Nice to be back from vacation.  I returned from the break to find that my article, A Dozen Reflections on Life and Markets, had been downloaded over 60,000 times in three days--an unusual viral phenomenon given that it was written over a year ago.  In any case, I wrote a followup set of reflections based on my forthcoming book and will publish those Friday on the Trading Markets site.

TraderFeed examines what happens after four-day periods of rising interest rates and falling financial stocks.

The charts below show clearly what's going on:  rising interest rates, weak financial issues, but strength among secondary stocks.  It's when rising rates punish all sectors that we need to be concerned for the bear.

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Thursday's market was weighed down by weakness in fixed income, taking a particular toll on large cap issues.  We closed below the day's average price of ES 1311, returning us to a neutral short-term trend.  A plurality of issues traded in short-term downtrends and, among large caps, new short-term lows outnumbered new highs.  We're seeing short-term selling pressure in the broad market and among large caps, but price is holding up well despite the loss of momentum--particularly among secondary and NASDAQ issues.  The Adjusted TICK ended at -441; the Institutional Composite finished at -439.  Demand fell to 65; Supply rose to 58.  New 20 and 65 day highs rose to 1387 and 815; new 20 and 65 day lows dropped to 523 and 236.  We are in a broad intermediate-term range and need to see new price highs and an expansion of new highs to return to an uptrending mode.

March 27, 2006

Note:  In celebration of finishing my book manuscript this weekend, I will put an end to my 4AM - late evening work schedule and collapse in a heap in the warmth of the Florida sun.  All my updates between Monday and Thursday will be on the TraderFeed blog.  My next posting here will be Thursday night.  The book will be out this fall and is titled "Enhancing Trader Performance".  It features a review of research on human performance as applied to trading, observations/interviews/case studies with successful traders, and two manuals for applying brief therapy techniques to your own trading.  The reference list by itself ran for 10 pages.  Whew!

 

Does our self-talk make a difference in how we trade?  This article, from a recent issue of SFO Magazine, explores the issue.

TraderFeed takes a look at mean reversion as one consequence of the countertrend equivalence found in recent posts.

My upcoming Trading Markets article, scheduled for Monday, extends the mean reversion theme by examining variables that predict retracements.

Friday's market continued in its trading range, but there was underlying strength in the broad market.  We closed near the day's average price of ES 1312, continuing the neutral short-term trend.  A move above Friday's highs that expands new highs would return us to a short-term uptrend.  A majority of issues traded in short-term uptrends and new highs and lows were relatively balanced on a short-term basis among large caps.  The market thus far has held up well despite a loss of intermediate-term momentum.  New highs have dominated lows among large caps on an intermediate-term basis, although Money Flow continues to look weak.  Friday's Adjusted TICK ended at +125; the Institutional Composite was -184.  Demand rose to 92; Supply was 36.  New 20 and 65 day highs rose to 932 and 575; new 20 and 65 day lows fell to 382 and 137.  While we remain rangebound in the ES, I would be hesitant to short this market as long as we're seeing strength in the small and midcaps.

March 26, 2006

The Trader Performance blog extends the recent postings on countertrend equivalence, suggesting an interesting trading strategy.

TraderFeed looks at countertrend behavior over a longer time frame, finding a common pattern.

The Articles page has been updated with two recent articles on market trending and volatility.

Provocative thoughts on energy from John Mauldin.

March 25, 2006

Here is the Trading Markets article on countertrend behavior across time frames.

TraderFeed looks at trading mechanics and risk management.

Here is a great Wall St. Journal story on PIT Instruction and Training, the group that trains NASCAR pit crews.  They have a great handle on performance issues; many good articles in their press archives.

Great charts posted by Steve Yuen, comparing the present time period to post-crash periods.

Very interesting post about the market questions that are asked at Victor Niederhoffer's trading shop.

March 24, 2006

Countertrend equivalence:  TraderFeed takes a look at trends existing over particular time frames--and finds a pattern in the next time frame.

The next Trading Markets article, which should appear Friday, will take a different look at countertrend equivalence, using X period highs and lows instead of trend measures.

Interesting links at the Trader Mike site.

Declan Fallond has an excellent list of market resources.

Thursday's market traded in a narrow range, closing near its day's average price and continuing the neutral trending mode.  The Adjusted TICK ended at +4; the Institutional Composite finished at +51.  Demand rose to 81; Supply was 49.  New 20 and 65 day highs rose to 804 and 497; new 20 and 65 day lows dropped to 438 and 164.  We continue in the multiday range; an expansion of new 20 day highs above the 825 from 3/21 or an expansion of new lows from the 595 on 3/22 is needed to validate a directional trend.

March 23, 2006

TraderFeed examines historical patterns across multiple timeframes and outlines new research directions with the trend measures.

Here is John Forman's blog.  His forthcoming book with Wiley is an excellent introduction to trading and the markets.

Just got done talking with Jim Dalton, whose book Mind Over Markets is a classic and a great introduction to Market Profile.  Next spring we'll be treated to his next book, entitled "Markets in Profile".  

Very interesting momentum trading strategy from Trade Ideas.  I might look at this on a longer time frame.

The market followed historical precedent and rallied after making a five-day low.  We closed above the day's average price of ES 1311 and returned to the prior trading range.  This also returns us to a neutral trending mode.  The Adjusted TICK was strong at +511, and the Institutional Composite was also firm at +247.  Demand was 76; Supply was 51.  New 20 and 65 day highs dipped to 655 and 407; new 20 and 65 day lows modestly expanded to 595 and 236.  We need to stay above this level of new lows; otherwise we return to a short-term downtrend.  Otherwise we're in an intermediate-term trading range and fading moves to the range extremes that do not expand new highs/lows is the operative mode.

March 22, 2006

TraderFeed uses the Power Measure to assess trending and then looks at what happens once we have trends in place.

The Trade Ideas blog offers thoughts about the market's reduced volatility and trending.

More excellent links on The Kirk Report.  I also like their Q&A section, where editor Charles Kirk tackles a variety of market and trading topics.

Against a backdrop of rising interest rates, Tuesday's market started weak, moved toward the top of the recent range, and then fell through the afternoon to close below its day's average price of ES 1313.5.  This started a short-term downtrend and continued a pattern noted recently of expanding new lows.  Downside momentum has picked up, short-term and intermediate.  A plurality of issues traded in short-term downtrends and, among large caps, new short-term lows outnumbered new highs.  The Adjusted TICK was quite weak at -610, continuing a weakening pattern.  The Institutional Composite ended at -145.  Demand dropped to 37; Supply soared to 129.  New 20 and 65 day highs dropped to 825 and 531; new 20 and 65 day lows expanded to 587 and 228.  We made day over day lows with expanded new lows; as long as that's the case, we remain in the short-term bearish mode.

The Power Measure of trending behavior can also be constructed on an intraday basis.  Below we can track the last two days on the ES.  I'll run some tests of expectations on an intraday basis shortly to see if these are the same as we've seen day-to-day.

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March 21, 2006

TraderFeed examines the relationship between small and midcap stocks and what that relationship means for the next day in the S&P 500 market.

John Mauldin offers perspectives from Stephen Roach regarding globalization and economic imbalances.

Monday's market traded in a narrow range, closing slightly below its day's average price of ES 1316.5 and starting a neutral trending mode.  The Adjusted TICK ended at -431 and the Institutional Composite finished at -15.  Demand was 55; Supply was 75.  New 20 and 65 day highs dropped to 1107 and 755; new 20 and 65 day lows also dipped to 478 and 188.  We are trading in a three-day range; the average prices for the past three days have been 1317.5, 1317.5, and 1316.5.  I remain concerned by the elevated number of stocks making lows here.

Long-time readers of the Weblog may recall a measure called the Power Measure, which I used as an indicator of trending behavior.  Interestingly, in the current market, by the time the Power Measure registers a trend, it's time for a reversal.  Note that a score of 100 would represent perfect uptrending; -100 would be perfect downtrending; and zero is equivalent to non-trending.  Ironically, this might be valuable in itself--as a contrary measure.  I'll play with the idea and report here if I find anything good.

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March 20, 2006

TraderFeed takes a longer-term look at the relationship between large and small cap performance and what that indicates for the coming week.

My upcoming Trading Markets article will follow up on the large cap/small cap performance issue, emphasizing the interaction between the two as important to market expectations.  It should appear Monday.

Friday's market traded in a narrow range, closing near its day's average price of ES 1317.5 and continuing the short-term uptrend.  A plurality of issues traded in short-term uptrends, but among large caps, short-term new highs and lows were relatively even.  Intermediate-term momentum reached levels normally associated with momentum peaks, which in turn tend to precede price peaks.  The Adjusted TICK ended at +62; the Institutional Composite was +108, its sixth consecutive positive reading, reflecting buying interest among large caps.  Demand fell to 55; Supply was 60.  New 20 and 65 day highs fell to 1263 and 847; new 20 and 65 day lows rose to 500 and 193--surprisingly high levels considering we are hovering near our bull highs.  I will be watching the new lows closely; they should dry up if this new bull leg is to continue.  We continue to see price strength and evidence of buying interest, sustaining the uptrend.

March 19, 2006

TraderFeed looks at relative price performance between large and small cap stocks and what that means for next-day performance in the S&P 500.

John Mauldin has an excellent article on the housing market and its impact on the economy.

The Trader Performance blog draws upon my recent conversation with Jon Markman and looks at flexibility as the key to trader longevity.  Jon has a keen eye for long-term value in the market and has developed portfolios for both traders and investors through his services.

March 18, 2006

TraderFeed looks at closing NYSE TICK levels and implications for the next day's trade.  

Here is the Trading Markets article on the Euro currency market and some surprising conclusions for traders.

This has been a winning strategy for years, since I first saw it featured on the Decision Point site.  If I had to subscribe to only one technical analysis site, this would be it.  Note that investing in the smallest components of the SPX index brought huge returns.  This also may have something to do with the presence of the largest issues in a greater number of arb/program trades among institutions that need the liquidity of the super cap stocks.  Amazingly, the unweighted S&P 500 is now almost 50% above its prior bull market highs from 2000.  The normal, weighted S&P remains 200 points below its all-time highs.  I strongly suspect that the greatest equity opportunities are in the issues not favored by institutions.

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March 17, 2006

Well, now you see why I maintain and follow the Weblog trend measures, even when I have doubts about the market trend, as expressed recently.  Some people have asked me why I maintain measures of market trending when my own research shows that the S&P 500 is not a trending index.  My answer is that, in all my research, the Weblog measures are the best indicators I've found for establishing whether or not short-term trending conditions exist.  Thus, even while I've had doubts about the vigor of the trend, it has not paid to act on those doubts as long as the measures have been showing sustained strength.

TraderFeed takes a look at the Euro currency market and questions commonly held assumptions.  My upcoming Trading Markets article will examine this in detail.

One of the Weblog mainstays is the Institutional Composite, which measures the relative buying and selling interest among large cap issues.  Here is an oscillator of the Composite, which shows how buying in the large caps has picked up in the last three days.

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Remember what I said in the March 15th entry re: the big four markets?  Thursday's move up was clearly signaled by strength in bonds and a falling dollar in response to the mild inflation news and hopes that Fed tightening is coming to an end.  Trending moves in the ES are frequently tied to sustained movements in currencies, the dollar, and/or energy.  I hope to test this idea shortly.

Thursday's market moved higher on economic news, closing near its day's average price and sustaining the short-term uptrend.  A plurality of issues traded in short-term uptrends and new short-term highs outnumbered new lows among large caps.  We're also seeing solid buying momentum on an intermediate-term basis.  The Adjusted TICK was +263, its third consecutive positive reading; the Institutional Composite (see above) ended at +421.  Demand was 83; Supply was 49.  New 20 and 65 day highs expanded to 1589 and 1049.  The latter is the highest level of new highs since January (see comment from yesterday, however).  New 20 and 65 day lows were 402 and 147.  We continue to make new price highs and expand new highs, supporting the short-term uptrend.

March 16, 2006

We're making bull market highs in the S&P 500, so it's worth asking:  How many stocks are making new annual highs?  Out of the 500 S&P issues, we're seeing 70 new highs on Wednesday.  That's down from 81 in January.  Out of the 400 S&P Midcaps, we're seeing 38 new highs--down from 62 in January.  And out of the 600 S&P Small Caps new highs are at 51, down from 108 in January.  As long as the Weblog measures tell us it's a bullish trend, I go with that when trading the coming day, but something isn't right with this rise so far...

TraderFeed looks at two-day strength in the NASDAQ and the impact of low TRIN.

Trader Steve offers valuable international perspective on his blog.

Wednesday's market traded in a narrow range in the morning before breaking to the upside and continuing the short-term uptrend with a close above the day's average price of ES 1310.  The Adjusted TICK ended at +210; the Institutional Composite was +24.  The lagging of these measures fits with the weak new highs data mentioned above.  Demand remains strong at 101; Supply was 32.  New 20 and 65 day highs rose to 1213 and 813; new 20 and 65 day lows dropped to 459 and 148.  We continue to make new highs and expand new highs.  As mentioned in recent posts, that keeps us in the short-term uptrend mode.

March 15, 2006

We hit a nice trending move on Tuesday, preceded by a move down in interest rates and a move up in the Euro currency.  I'd like to toss out a hypothesis that might make a nice research study down the road:  The big four markets of stocks, currencies, interest rates, and energy reflect the major fundamentals of world economies.  We are more likely to have a trending move in one of the four if there is significant movement in at least two of the other three.  Tuesday, for instance, we had rising oil, rising bonds, and falling dollar.  There was speculation that Fed tightening would soon discontinue and this buoyed stocks and bonds, even as it pressured the dollar.  We're more likely to see a sustained rally or break in stocks if something fundamental occurs to make investors revalue currencies, rates, and energy.  If those other markets are not showing revaluation, why would global players revalue equities?  Keeping an eye on the macro picture may help catch those trending moves that (rarely recently) occur in the stock indices.

The Barchart site has been sending out a morning newsletter to subscribers that summarizes global and U.S. news and markets, including recent and upcoming economic reports around the world and earnings.  It's quite good, especially for currency and other traders taking a macro view.

TraderFeed examines strong three-day periods with low TRIN readings.

Excellent links at the Trader Mike and Kirk Report blogs.

Tuesday's market started lower, but rallied through the afternoon to close above its day's average price of ES 1302.  This continued our short-term uptrend.  A plurality of issues traded in short-term uptrends and, among large caps, new short-term highs steadily outnumbered lows.  We're also seeing rising intermediate-term momentum.  The Adjusted TICK ended at +588; the Institutional Composite finished at +520--both indicating solid buying pressure.  Demand ended at 117; Supply was 40.  New 20 and 65 day highs, surprisingly, did not rise much, ending at 924 and 596.  New 20 and 65 day lows dipped to 616 and 218.  These figures are surprisingly weak, given the fact that we're at new highs in the S&P and NYSE markets.  As long as we see continued price highs day over day and an expansion of new highs, the short-term trend remains bullish.

March 14, 2006

Here is the Trading Markets article, a long-term look at trending and volatility in the Dow.

TraderFeed begins a look at the TRIN and the issue of market efficiency.

John Mauldin offers interesting perspectives on China.

Looks like I'll be doing an online presentation for Woodie's CCI Club in April.  I'll also be doing two sessions for the OptionsXPress Xpo early in May.

Monday's market broke higher, closing near its day's average price of ES 1295.5 and starting a short-term uptrend.  Despite the uptrend, there is noticeable weakness among many Weblog measures.  The Adjusted TICK was -255, continuing its recent weakness.  The Institutional Composite was +72, also at tepid levels.  Demand was 99; Supply was 48.  New 20 and 65 day highs rose to 924 and 585; new 20 and 65 day lows were notably high at 702 and 244.  We have moved higher day over day and expanded new highs; as long as this is the case, the trend is up.  

March 13, 2006

My new book is in its final editing, and so far it's looking good.  The Psychology of Trading focused on understanding and changing one's emotional patterns; Enhancing Trader Performance will focus on how traders develop expertise. 

TraderFeed takes a weekly look at the S&P and NASDAQ markets and finds a different pattern of trending.

Keep an eye out for the Trading Markets article due to be posted Monday AM.  I believe it's my best yet--a long-term look at changes in market volatility and trending.

Friday's market firmed, but stayed in a range, closing near the day's average price of ES 1290.  This continued the neutral market trend.  The Adjusted TICK ended at +235; the Institutional Composite was +38.  Both measures have been tepid during the attempted bounces of the past two trading sessions.  Demand ended at 94; Supply was 38.  New 20 and 65 day highs rose to 597 and 379; new 20 and 65 day lows also rose to 857 and 323.  We continue to stay in an intermediate term trading range.  I'm looking to fade moves to the range extremes that do not expand new highs/lows.

March 12, 2006

The Trader Performance blog looks at the momentum/trending qualities of a variety of instruments, examining the impact on performance.

TraderFeed continues the look at trending in the S&P 500 with an examination of very short-term intraday patterns.

The initial article on the loss of market volatility and trend has been posted to the Articles page.

John Mauldin has some interesting ideas about protectionism and its implications.  Meanwhile, this eye-opening tidbit from his site:

The median family has about $3,800 in the bank, do not have a retirement account, has a home worth $160,000 with a mortgage of $95,000. No mutual funds, stocks or bonds populate their investment portfolios. They make (jointly) $43,000 and struggle to pay off their $2,200 in credit card debt. That means 50% of Americans are in worse shape than the above. It is not a pretty picture.

March 11, 2006

Here is the Trading Markets article looking at trending behavior in the S&P over the past 40 years.

TraderFeed looks at trending of the S&P on an intraday basis and what it means.

Some worthwhile screening by Charles Kirk of The Kirk Report; his service for subscribers follows his trades and includes several of his favorite screens.

Here's another interesting piece of the trending/volatility puzzle.  Michael Bryant just sent out a newsletter regarding his volatility breakout system, called MiniMax.  It turns out MiniMax is working quite well, but not for the stock indices it was designed for.  It's now turning profits in such markets as crude oil and Yen futures.  It appears that it's not the strategy that's successful, but the relative fit between strategy and market.

Trade Ideas has posted a list of their newest screens.  These will sound alerts when your trade criteria are met.  I've found the service flexible and helpful, especially in monitoring volume trends, new highs/lows, and price breakouts.

March 10, 2006

TraderFeed explains why solid trading ideas are necessary but not sufficient for profitability.  Keep an eye out for a new analysis before the Friday open.

February's Weblog entries are archived above.  Here is the archive for my Trading Markets articles.  TraderFeed archives are on the blog site.

John Rutledge offers interesting perspectives on economic developments in Japan.

Thursday's market opened higher, but sold off through the day to close near recent lows.  We closed below the day's average price of ES 1289 on the June contract and continued the neutral trending mode.  A plurality of issues traded in short-term downtrends and new short-term lows outnumbered new highs among large caps as the afternoon progressed.  The Adjusted TICK ended at -281 and the Institutional Composite finished at -196.  Demand was 59; Supply was 57.  New 20 and 65 day highs rose to 535 and 330; new 20 and 65 day lows dropped to 787 and 286.  We're seeing continued weakness, but notice that new lows are drying up.  I will be monitoring this closely and would be cautious chasing new price lows that do not bring an expansion in stocks making new lows. 

March 9, 2006

I had an interesting talk with Terry Liberman of the WINdoTRADEr program, and he walked me through the latest version of the program.  It includes new features for monitoring volume through the day and allows you to follow the market on multiple time frames on a single screen, so that you can see what is happening trade by trade, but also gauge market action vis a vis the day's Market Profile.  They'll be upgrading their website in early April with considerable educational content; I'll report further when that's up.

My upcoming article for Trading Markets (scheduled for weekend publication) takes a 40-year look at the S&P 500 and its trending behavior.  The data clearly show that we're at all time lows in trendiness.  This has major implications for anyone trading a trend following or momentum-based style.  It highlights for me the importance of trading instruments that optimally exploit your trading style.  I plan to pursue this topic in depth in coming posts here and on the TraderFeed blog.

Our TraderFeed pattern was looking for a bounce and we got it on Wednesday after initial weakness.  We closed above the day's average price of ES 1275.5, returning us to a neutral trending mode.  The Adjusted TICK ended at +130; the Institutional Composite finished at +167.  Demand rose to 61; Supply was 77.  New 20 and 65 day highs rose modestly to 406 and 233; new 20 and 65 day lows also rose to 1367 and 449.  We rallied above the previous day's high; a move above Wednesday's highs that expands new highs would shift us to a short-term bullish mode.

March 8, 2006

Banner day today:  I finished the manuscript for my upcoming book with Wiley.  It's entitled Enhancing Trader Performance: Proven Strategies From the Cutting Edge of Trading Psychology.  Now it's time for editing, in anticipation of a Fall publication.  Highlights of the book?  Step by step instructions for improving trading performance based on research from other performance fields and detailed manuals for two brief therapies so that traders can become their own therapists.

TraderFeed examines what typically occurs when large cap stocks are strong, but secondary issues are weak.  I'll have another analysis posted early Wednesday AM.

A reader passed along this interesting link from Fred Goodman, looking at the market's recent drop in volatility.

Dr. John Rutledge offers interesting posts, particularly tracking the huge weakness in the Middle Eastern stock markets.

Tuesday's market was deceptive, with strength in the large caps, but quite a bit of weakness in the broad market (see TraderFeed entry).  What that's telling us is that the market is reacting negatively to interest rate rises, with particular sensitivity among growth-oriented stocks.  This is a regime worth watching going forward.  We closed near the day's average price of ES 1275.5, sustaining the short-term downtrend.  A strong plurality of issues traded in short-term downtrends and, among large caps, short-term new lows outnumbered new highs.  We're not seeing as much weakness in the new lows among large caps as in the broad market, reflecting a defensive posture by market participants.  The Adjusted TICK ended weak at -683; the Institutional Composite finished at -152.  Demand dropped to 30; Supply stayed high at 140.  New 20 and 65 day highs dropped to 370 and 221; new 20 and 65 day lows soared to 1227 and 415.  We continue to make price lows day over day and expand new lows, with distinct selling pressure in the broad market.  As long as that's the case, selling bounces remains the preferred strategy.

March 7, 2006

TraderFeed looks at large five-day jumps in interest rates and what they mean for stocks.

Here is the Trading Markets article on reduced intraday opportunity in the stock indexes.

Here's an implementation of TraderFeed research from Trade Ideas.

Excellent article on the housing market and the economy posted by John Mauldin.

Monday's market broke below its recent trading range, closing below the day's average price of ES 1283.5 and shifting into a short-term downtrend.  A distinct plurality of issues traded in short-term downtrends, but new short-term lows were only moderately higher than new lows among large caps.  We are seeing strong selling momentum on a short-term basis in the broad market and in the large caps; the momentum is also negative on an intermediate-term basis among large caps.  The Adjusted TICK was quite weak at -704; the Institutional Composite was weak again at -352.  Demand dropped to 37; Supply soared to 153.  That means that more than four times as many issues are trading with significant downside momentum as upside momentum.  Usually when the ratio is so skewed, there is some follow through to the downside.  New 20 and 65 day highs dropped to 816 and 538; new 20 and 65 day lows expanded significantly to 843 and 280.  We have broken through an intermediate-term range; as long as we stay below that range and continue to see expanded new lows and a negatively skewed Demand/Supply balance, the short-term trend is down.

March 6, 2006

TraderFeed rounds out the recent research by examining patterns involving the midday hours.

An article for Trading Markets scheduled for Monday AM examines why short-term traders are struggling in the current market.

Interesting tidbit: The Barchart site has a feature for subscribers that tracks the performance of stocks, ETFs, etc. for a variety of technical trading systems.  Most of these systems are trend following and momentum based.  There are 13 systems.  All 13 have been profitable trading GOOG over the past two years.  None of the 13 have been profitable trading SPY.  That tells you something about trending behavior in the broad market.  It also tells you something about the importance of stock picking if you're trading technically.

Friday's market traded lower before moving back into its trading range and then falling back by the close.  We ended below the day's average price of ES 1291, sustaining the short-term neutral trend.  The Adjusted TICK was -272; the Institutional Composite ended down for the seventh consecutive session at -166.  Both measures show increased selling as we trade within this range.  Demand dropped to 47; Supply rose to 89.  New 20 and 65 day highs rose slightly to 1071 and 720; new 20 and 65 day lows also rose slightly to 490 and 185.  We are firmly in an intermediate-term range; new highs are below levels registered on 2/27; new lows are below levels from 2/28.  A break of these parameters with prices making new highs/lows is needed to establish a trending mode.

March 5, 2006

The Trader Performance page continues its look at lean processes for maximizing trading returns, focusing on joining research on *what* to trade with research on *when* to trade.

TraderFeed examines the last hour of trading and what it means for the next day's trade.

Very interesting commentary from John Mauldin on worldwide interest rates and savings rates in this country.

Here is a comprehensive set of market-related links from Declan Fallond.

March 4, 2006

Here is the Trading Markets article on interest rate rises and stock performance.

TraderFeed looks at what typically happens after weak market opens.

We came up to recent highs in the S&P on Friday, but only 43 S&P 500 stocks made annual new highs.  That's down from over 60 last week and over 80 in January.  That, and other good market information such as the chart below, comes from Decision Point.  The waning number of ES stocks above their 20-day MA fits with the slowdown in new 52-week highs.  Excellent website.

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More good links from The Kirk Report.

Eye-opening perspective from Alan Newman regarding current valuations.

March 3, 2006

TraderFeed takes a real time look at market patterns involving the opening price and explores what typically happens after a day such as Thursday, in which gold prices and interest rates are sharply higher.

Another screening tool is the PowerRating service developed by the Trading Markets site.  This appears to be geared for swing timeframe performance, unlike the longer-term StockScouter service developed by MSN Money and Trade Ideas, which excels at intraday and user-defined searches.  Screening tools interest me in that they are ways of finding individual issues that could exploit broad market patterns, such as those identified on the TraderFeed site.  I wonder how the screening tools would work in concert and with the historical market patterns, combining multiple sources of potential edge...

We traded in a range on Thursday, opening lower before moving back above the day's open.  We closed slightly above the day's average price of ES 1288, continuing the neutral trending mode.  A narrow plurality of issues traded in short-term downtrends.  We're seeing waning short-term momentum in the broad market and especially among large caps, where we're seeing short-term lows outnumbering highs.  The Adjusted TICK ended at -325, and the Institutional Composite was weak again at -268.  Demand fell to 57; Supply rose to 69.  New 20 and 65 day highs dipped to 1068 and 710; new 20 and 65 day lows rose modestly to 437 and 173.  We continue in an intermediate-term trading range; fading the range extremes on moves that do not expand the number of issues making fresh new highs/lows is the operative strategy.

March 2, 2006

One of my best TraderFeed entries to date illustrates the idea of sequence analysis by investigating what happens when a down day is followed by a strong open.

I continue to be impressed by the amount of quality material available on trading and investing via blogs.  Here is Bill Cara's comprehensive site.

Here's an interesting screening program recently reviewed in Barron's.  You can see why markets are becoming more efficient as tools formerly available only to quant shops now enter the trading mainstream.

Wednesday's market rebounded from the previous day's decline on solid buying in the broad market.  We closed above the day's average price of ES 1288.5, returning us to the previous trading range and a neutral trending mode.  The Adjusted TICK ended at +409, but selling was more evident in the large caps, as the Institutional Composite ended at -203.  Demand rose smartly to 120; Supply dropped sharply to 37.  New 20 and 65 day highs rose to 1100 and 740; new 20 and 65 day lows dropped to 414 and 158.  We are in a wide intermediate-term trading range defined by Monday's highs and Tuesday's lows.  I am going to be careful chasing moves to the range extremes that do not expand the number of stocks making fresh new highs/lows. 

March 1, 2006

TraderFeed examines what typically happens when we make a five-day low the day following a five-day high.  

Also take a look at the TraderFeed entry for January 31st, which details bearish expectations after a broad momentum down day such as we had on Tuesday.

Trade Ideas is planning a seminar for users in San Diego; looks interesting.  Here is a Trade Ideas strategy implementing a pattern from TraderFeed and here are other strategies.

Tuesday encountered persistent selling, taking us below the day's average price of ES 1284.5 and initiating a short-term downtrend.  The Adjusted TICK ended at -502; the Institutional Composite was also quite weak at -518.  Demand fell to 32; Supply soared to 131, showing the broad downside momentum referenced in the January 31st TraderFeed entry.  New 20 and 65 day highs dropped to 810 and 540; new 20 and 65 day highs rose to 625 and 224.  We broke below the recent trading range and, as long as we see new price lows and an expansion of stocks making fresh short-term lows, the trend will belong to the bears.

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